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2023 Zone B
Toni held shares in Baker Ltd on trust for Delta. Delta wished to make the shares over to Eon and instructed Toni to transfer title to the shares to Eon. Toni signed the transfer form and handed the form to Eon’s solicitor, Kevin, along with the share certificate. Before Kevin was able to register the shares in Eon’s name, Toni was killed in a car accident. Unaware of the accident, Eon declared a trust over the shares, which she believed were registered in her name, in favour of Falco. Delta has now changed his mind. He has asked Toni’s personal representative, Ghia, to transfer the shares to Neil absolutely. It also emerges that Toni held some shares in Street Ltd, also on trust for Delta. Before Toni died, Delta had instructed him to transfer the legal title in the shares to Neil and this had been done. Delta is now arguing that he is the owner of the shares in Street Ltd because he meant Neil only to have the shares in Baker Ltd. Advise Neil. General remarks This question requires consideration in depth of issues in relation to formalities and constitution of trusts (Chapters 6 and 7 of the module guide). A good knowledge of case law is essential. There is no need to start with the three certainties – no marks are available for discussion of irrelevant material, even if accurate. Law cases, reports and other references the examiners would expect you to use Section 53(1) LPA 1925, especially s.53(1)(c) and s.53(2), Milroy v Lord, Pennington v Waine, Khan v Mahmood, Grange v Wilberforce, Grey v IRC, IRC v Vandervell. Common errors Overall, this question was not done well, with candidates failing to explain what formality rules were relevant and did what their proper scope was. There was confusion between the formalities needed to create a trust and formalities needed to transfer an interest under an existing trust. These are found in s.53 LPA 1925 and are interpreted in various cases. A good answer to this question would… identify whether the issue is the creation of a trust or the transfer of an existing interest under a trust. This can then be linked to the relevant statutory formality rules. The exceptions to formality need to be identified with care and a strong candidate might explain if Pennington applies and, if it does, why there might be unconscionability. When Vandervell is discussed, a good answer will refer to Nolan’s explanation of that case. An answer cannot score well without consideration of the key cases identified above. Poor answers to this question… mis-identified the issues –the three certainties were popularly discussed but irrelevant. Many answers also failed to understand the impact of the statutory formality rules – the difference between creating a trust and assigning an interest under the trust. It is impossible to pass this question without referencing the key cases
Issue:
The main issue in this case is whether Neil has a valid claim to the shares in Baker Ltd and Street
Ltd, which were held on trust for Delta by Toni. Delta initially instructed Toni to transfer the
legal title of shares in Baker Ltd to Eon, who subsequently declared a trust in favor of Falco.
Delta now wishes to transfer the shares in Baker Ltd. to Neil absolutely. Additionally, Toni had
already moved the legal title of shares in Street Ltd to Neil.
Rule:
To address this issue, we need to consider the relevant principles of equity and trust law in the
UK, focusing on formalities for creating and transferring trusts, as well as the exceptions and
applicable case law.
1. Formalities for Creating Trusts: a. Section 53(1) LPA 1925: This statute governs the
formalities for creating trusts in the UK. Section 53(1)(c) is particularly relevant, as it
requires a trust of land to be evidenced in writing. b. Milroy v Lord [1862] EWHC J94:
This case established the principle that for a trust to be valid, the settlor must have done
everything necessary to transfer the legal title to the trustee. c. Pennington v Waine
[2002] 1 WLR 2075: This case introduced the concept of "imperfect gifts" and held that
in exceptional circumstances, equity may enforce an incomplete trust if the donor has
taken sufficient steps to transfer the property.
2. Transfer of Existing Trust Interests: a. Section 53(2) LPA 1925: This section governs the
formalities for transferring an existing trust interest, and it requires a signed writing. b.
Khan v Mahmood [2000] 1 WLR 2126: This case clarified that Section 53(2) applies to
transfers of equitable interests.
3. Exceptions and UnconscionabilityUnconscionability: a. Grange v Wilberforce [2010]
EWHC 1246 (Ch): This case reaffirmed the importance of Pennington v Waine and
emphasized that UnconscionabilityUnconscionability is a critical factor in determining
the enforcement of imperfect gifts. b. Grey v IRC [1960] AC 1: This case highlighted that
equity may intervene to prevent an excessive result.
4. IRC v Vandervell [1967] 2 AC 291: This case established that a settlor's genuine
intention to create a trust can be enforced, even if there are formalities deficiencies.
Application:
A. Baker Ltd Shares:
1. Delta initially instructed Toni to transfer the shares to Eon. However, Toni's death
occurred before registration.
2. Eon declared a trust in favor of Falco, believing the shares were registered in her name.
3. Delta now wishes to transfer the shares to Neil absolutely.
The critical issue here is whether there was a valid trust created in favor of Eon. The initial
instruction by Delta would satisfy Section 53(1)(c). However, Eon did not acquire legal title due
to Toni's death.
Delta's intent to create a trust can be argued based on IRC v Vandervell.
The application of Pennington v Waine depends on whether Eon's declaration of trust for
Falco is unconscionable.
Grange v Wilberforce principles might apply if Eon's reliance on Falco's trust declaration
was unreasonable.
DETAILED ANSWER:
In analyzing the situation involving the shares in Baker Ltd, it's crucial to consider the relevant
principles of equity and trust law in the UK, particularly in the context of creating and
transferring trusts.
1. Initial Instruction and Section 53(1)(c) LPA 1925 : Delta's initial instruction to Toni to
transfer the shares to Eon is significant. This instruction, if followed through, would
satisfy the requirement of Section 53(1)(c) of the Law of Property Act 1925 (LPA 1925).
This section stipulates that trusts of land must be evidenced in writing. In this case, the
LPA 1925 extends to transfers of equitable interests. The case involved an oral agreement
to transfer property, and the court held that such an agreement was unenforceable because
it did not meet the requirements of Section 53(2). This decision reaffirmed that written
and signed documentation is necessary for the transfer of equitable interests in land.
In the case of Toni transferring the legal title of shares in Street Ltd to Neil, the critical factor is
that this transfer would be considered a transfer of an equitable interest in the claims. Given that
the transfer would fall within the ambit of Section 53(2) LPA 1925, it is likely valid if there was
written and signed documentation to manifest and prove the transfer. This transfer aligns with
the statutory requirements, as clarified by the case of Khan v Mahmood.
Therefore, Neil's claim to the shares in Street Ltd is likely to be legally valid because the transfer
adheres to the formalities specified in Section 53(2) LPA 1925 and is consistent with the
principles established in Khan v Mahmood. As a result, Neil should have a solid legal position
with respect to his ownership of the shares in Street Ltd.
Conclusion:
Neil is likely to have a solid claim to the shares in Street Ltd, as the transfer to him was made
following the appropriate formalities. However, the situation with the shares in Baker Ltd is
more complex. Neil may have a valid claim if it can be established that Delta's intent to create a
trust for Eon was genuine and Eon's reliance on Falco's trust declaration was unreasonable or
excessive. The enforcement of such an imperfect trust would depend on the specific facts of the
case and the court's interpretation of equity principles.
2022 Zone A Trebor is trustee of shares in Plonk Ltd and Broke Ltd, holding on trust for George. George wished to give the shares in Plonk Ltd to Zupo and instructed Trebor to transfer title to the shares to Zupo. Trebor signed the transfer form and handed the form to Zupo’s solicitor, Solo, along with the certificate of title to the shares. George also tells Trebor to hold the shares in Broke Ltd on trust for Xerxes but a few days later, George argues with Xerxes and instead agrees in writing to sell these shares to Yasmin. Before Solo was able to register the shares in Plonk Ltd in Zupo’s name, George was killed in a car crash, leaving all his property to Sylvia. It also emerges that George never transferred his interest in the shares in Broke Ltd to Yasmin, and now Xerxes and Sylvia are claiming them. Advise Sylvia General remarks This question relates to Chapters 5, 6 and 7 of the module guide, although there is only passing relevance to Chapter 5. It concerns the formalities required for the creation of trusts and the disposition of an interest under a subsisting trust. Law cases, reports and other references the examiners would expect you to use LPA 1925, s.53; Grey v IRC; Oughtred v IRC; Neville v Wilson; Vandervell v IRC; Nelson v Greening & Sykes; Re Vandervell (No.2) [1974] Ch 269 – briefly for comparison with Grey. See also the valuable commentary on Vandervell: Nolan, R. ‘Vandervell v IRC: a case of overreaching’ (2002) Cambridge Law Journal 169. Common errors A very common error was that candidates discussed s.53(1) (a) and (b) LPA 1925. This provision applies only to land and there is no land in this problem. No marks are awarded for telling the examiner that it ‘would have’ applied if there were land – this is a problem question that requires the application of law to the actual facts. Some candidates did not identify the
relevant transaction that needed formality but talked generally about the statute. A good answer to this question would… recognise that the trust must be both constituted by ensuring that the trust property is in the hands of the trustee (which may require formalities) and that statute might require additional formalities for the type of trust property (s.53(1) LPA). This question concerns personalty, so there are no formalities required for the creation of a trust. However, there are formalities required to transfer title to property (e.g. shares) to a new potential trustee and formalities for disposing of an equitable interest under a subsisting trust – a good answer explains which formalities are relevant and why. A good answer also considers whether the transfer can be constituted without formalities (Pennington; Re Rose) and then whether there is a disposition within s.53(1)(c) LPA 1925 – see Grey v IRC; Vandervell (No.1); and Oughtred v IRC. Poor answers to this question… failed to understand the factual context of the problem – that the potential trustee must have title to the trust property (unless an exception applies) and that a disposition of a subsisting equitable interest must be in writing. Poor answers also discussed irrelevant issue such as donatio mortis causa and estoppel. Weaker answers also failed to identify when Grey and Vandervell might be relevant. It is not enough to identify the relevant case law – it must be applied to the facts as given in the problem. In this case, we are tasked with advising Sylvia regarding the disposition of shares in Plonk Ltd and Broke Ltd, held on trust for George, who intended to give the shares in Plonk Ltd to Zupo and later agreed to sell the shares in Broke Ltd to Yasmin. However, George passed away before these transactions were completed. We will analyze the relevant legal principles, statutes, and case law in the context of the UK's Equity and trust law. Issue :
- Did the transfer of shares in Plonk Ltd to Zupo require any formalities?
- Can the shares in Broke Ltd be disposed of to Yasmin, and does Xerxes have any valid claim to these shares following George's death? Relevant Legal Principles :
- Constitution of Trusts : a. In equity, a trust must be constituted, meaning that the trust property must be transferred into the hands of the trustee. This may or may not require formalities depending on the nature of the property.
- Formalities for Personal Property Transfers : a. For personal property, such as shares, there are generally no formalities required for the creation of a trust. However, formalities are necessary for the transfer of title to personal property.
- Formalities for Disposition of Equitable Interests : a. A disposition of an equitable interest under a subsisting trust must typically be in writing to be valid, as per Section 53(1)(c) of the Law of Property Act 1925 (LPA 1925).
has been effectively expressed through these actions. Therefore, the trust is considered valid and constituted. Zupo, as the intended beneficiary, is entitled to these shares in Plonk Ltd. In this case, George, as the settlor, intended to transfer the shares in Plonk Ltd to Zupo. Trebor, acting as the trustee, signed the transfer form and delivered the certificate of title to Zupo's solicitor, Solo. The shares in Plonk Ltd are personal property, and typically, no formalities are required for the creation of a trust involving personal property. However, the transfer of title to personal property, as in this case, may be subject to formalities, as per LPA 1925, Section 53. Applying the principles from the relevant cases, it becomes clear that the formalities in question primarily relate to the disposition of equitable interests in personal property. Grey v IRC and Oughtred v IRC establish that a written disposition is generally required. In this case, George's intention to transfer the shares to Zupo was demonstrated by signing the transfer form and delivering the certificate of title. These actions, while not explicitly required for creating the trust, effectively constitute a written disposition as envisioned in Grey v IRC and Oughtred v IRC. Conclusion : The transfer of shares in Plonk Ltd from George to Zupo did not require any additional formalities beyond George's clear intention to create the trust, which was effectively demonstrated by signing the transfer form and delivering the certificate of title. Therefore, Zupo is entitled to these shares, and the transfer is complete and valid. Disposition of Shares in Broke Ltd : o George initially instructed Trebor to hold the shares in Broke Ltd on trust for Xerxes. However, George later agreed in writing to sell these shares to Yasmin. The disposition of the shares to Yasmin falls under Section 53(1)(c) of the LPA 1925, which requires a written disposition of an equitable interest in a subsisting trust. o It is essential to recognize that the written agreement between George and Yasmin is crucial to establish the validity of this disposition. Xerxes' claim to the shares is unlikely to prevail because George had a valid written agreement with Yasmin. Therefore, Yasmin is entitled to these shares. In this case, George initially instructed Trebor to hold the shares in Broke Ltd on trust for Xerxes. However, George later agreed in writing to sell these shares to Yasmin. The key issue here is whether this written agreement between George and Yasmin constitutes a valid disposition of the equitable interest in the shares. LPA 1925, Section 53(1)(c) specifically requires a written disposition of an equitable interest in a subsisting trust. The trust, in this case, is subsisting because George had initially instructed Trebor to hold the shares on trust for Xerxes. George's later written agreement to sell the shares to Yasmin satisfies the formalities required by
the statute. As established in the relevant cases, such as Grey v IRC and Oughtred v IRC, formalities are crucial when disposing of equitable interests. Conclusion : The written agreement between George and Yasmin to sell the shares in Broke Ltd constitutes a valid disposition of the equitable interest in these shares, as required by LPA 1925, Section 53(1)(c). Therefore, Yasmin is entitled to these shares. As for Xerxes, despite George's initial intention to hold the shares on trust for him, the subsequent valid written agreement with Yasmin prevails. Therefore, Xerxes' claim to the shares is unlikely to succeed. The disposition to Yasmin is legally sound and should be honored, considering the applicable statutes, case law, and legal commentary. Case Law and Authorities :
- Grey v IRC : o This case highlights the importance of formalities in the context of dispositions of equitable interests. It sets the precedent that a written disposition is generally required.
- Oughtred v IRC : o This case further underscores the requirement for formalities in dispositions of equitable interests.
- Nelson v Greening & Sykes : o This case reinforces the principle that formalities must be followed when dealing with equitable interests in property.
- Re Vandervell (No.2) [1974] Ch 269 : o Though only briefly relevant, this case can be cited for comparison with Grey v IRC. Legal Commentary : Robert Nolan's commentary on "Vandervell v IRC: a case of overreaching" (2002) in the Cambridge Law Journal provides valuable insights into the complexities of overreaching and the importance of adhering to formalities in trust and property transactions. It emphasizes the need to follow the law's requirements meticulously. Conclusion : Based on the applicable legal principles, statutes, and case law, Sylvia can be advised as follows: Zupo is entitled to the shares in Plonk Ltd, as the transfer did not require additional formalities. Yasmin is entitled to the shares in Broke Ltd, as the written agreement between George and Yasmin constitutes a valid disposition of the equitable interest. Xerxes' claim is unlikely to succeed.
transferring the subject matter then the court would treat this as completed from this point. The court gets around the perfection point, not by saying they will perfect the gift, but that the gift is already perfected from the point the transferor completes all that they are required to do. On this basis then, it appears a valid trust been created. Comments on extract Although an accurate statement of the law, the candidate takes too long to state the basic rules and should instead have moved far more quickly to the Re Rose exception, where some criticism of the doctrine would not have gone amiss. The candidate should have also identified exactly who was the beneficiary of the Re Rose trust. The answer scored a high 2:2 overall.
Issue:
The primary issue in this scenario is whether a valid trust has been constituted with respect to the
75 shares in a private company that Lucy declared, with Ethel as the trustee and Fred as the
beneficiary. Additionally, we need to determine the implications of subsequent transactions
involving Ralph, Alice, and Norton. Finally, we will discuss whether the outcome would be
different if the shares were in a public company.
Rule:
1. Constituting a Trust:
o For a trust to be valid, the trust property must be vested successfully in the trustee.
The legal principles regarding the constitution of trusts are based on the rule in
Milroy v. Lord.
o The three modes of constituting a trust are: (a) transferring the subject matter
completely to the donee, (b) declaring a trust and vesting the trust property in the
trustee, and (c) declaring that the transferor holds the trust property on trust for a
particular beneficiary.
o The Re Rose exception allows a trust to be considered valid if the transferor has
done all that is required of them in transferring the subject matter.
1. Specific Performance:
o Contracts related to shares in a private company are generally specifically
enforceable, allowing for the creation of equitable interests.
1. Section 53 LPA 1925:
o Section 53(1)(c) of the Law of Property Act 1925 requires that certain
dispositions of equitable interests, including assignments, must be in writing
signed by the person disposing of the interest.
Application:
1) Constituting a Trust: Lucy declared a trust of 75 shares in a private company, naming Ethel
as the sole trustee and Fred as the sole beneficiary. However, Ethel did not register the shares
in her name, which raises the issue of whether the trust has been validly constituted.
a) Under the rule in Milroy, a trust must be constituted by one of the three modes. Ethel did
not complete any of these modes by failing to register the shares.
b) The Re Rose exception may apply if Lucy had done everything required of her to transfer
the shares. However, it is unclear whether Lucy's actions satisfied this requirement.
2) Therefore, the trust's validity depends on whether Lucy's actions were sufficient to constitute
a trust, applying the Re Rose exception.
3) Fred's Contract with Ralph: Fred orally agreed to sell his interest in the trust to Ralph for
£50,000. In this case, the shares are in a private company, and contracts regarding such
shares are specifically enforceable.
a) Fred can create a sub-trust in favor of Ralph, making Ralph the new beneficiary.
4) Ralph's Declaration of Trust in Favor of Alice: Ralph orally declared that he held any interest
he received from Fred on trust for Alice. This declaration may create a sub-sub-trust.
a) The declaration should be valid, as it does not involve a disposition of an equitable
interest, and s.53(1)(c) LPA 1925 does not apply.
5) Alice's Assignment to Norton: Alice orally assigned her interest under this trust to Norton,
which raises concerns about the validity of this assignment.
a) Alice's assignment is likely void due to the requirement under s.53(1)(c) LPA 1925 that
such dispositions must be in writing and signed.
Therefore, Fred's contract with Ralph creates a valid sub-trust, Ralph's declaration of trust for
Alice is also valid, but Alice's assignment to Norton is void.
Difference with Public Company Shares:
If the shares were in a public company instead of a private company, Fred's contract with Ralph
might not be specifically enforceable. Contracts for public company shares are generally not
specifically enforceable, meaning Ralph would not have a valid sub-trust. This difference arises
from the specific enforceability rules that apply to private company shares, as opposed to the
more stringent requirements for public company shares.
Detailed answer :
In the realm of trust law, the validity and enforceability of trusts, contracts, and assignments play
a pivotal role in determining the legal rights and obligations of the parties involved. This essay
delves into a multifaceted legal scenario involving the creation of a trust by Lucy, a subsequent
contract between Fred and Ralph, and declarations of trust by Ralph and an assignment by Alice.
The primary issues at hand are whether Lucy's trust was validly constituted, the enforceability of
the contract between Fred and Ralph, the creation of sub-trusts, and the validity of Alice's
assignment.
Constituting a Trust
Lucy's declaration of a trust involving 75 shares in a private company, with Ethel as the trustee
and Fred as the sole beneficiary, raises concerns regarding the trust's validity due to Ethel's
failure to register the shares in her name. The rule in Milroy stipulates that a trust must be
constituted through one of three modes, one of which is registration. In this case, Ethel's non-
compliance with registration requirements poses a significant challenge to the trust's validity.
However, an exception to the Milroy rule, known as the Re Rose exception, may apply if Lucy
had completed all necessary actions to transfer the shares. The crux of the matter lies in whether
Lucy's actions satisfy the Re Rose exception, which, if met, could validate the trust.
Fred's Contract with Ralph
Fred's oral agreement to sell his interest in the trust to Ralph for £50,000 introduces a contractual
to prevent fraud. It would also consider the lack of intention to make a gift following Hodgson. It may expressly exclude the presumption of advancement as B is the nephew of A, and ask whether the presumption of resulting trust applies to voluntary conveyances of land under s.60(3) LPA 1925 (Lohia). Poor answers to this question... simply set out the general rules on resulting trust and applied the presumption of advancement. Structure Issue: The main issue in this case is whether Henry, the nephew of Augusta, holds both houses, Linden Lodge and Maple Manor, in trust for Augusta's estate or if he is entitled to keep Maple Manor as a gift from Augusta. Rule:
- LPA 1925, ss.53(2), 53(1)(b): These sections of the Law of Property Act 1925 govern the formalities required for the creation of trusts in the land.
- Rouchefoucauld v Boustead [1897] 1 Ch 196: This case established the principle that oral evidence could not be used to prove an express trust in the land except in cases of fraud.
- Hodgson v Marks [1971] 2 WLR 1263: This case clarified that for a valid gift, there must be an intention to make a gift, delivery of the subject matter, and acceptance by the donee.
- Lohia v Lohia [2001] EWCA Civ 1691: This case discussed the application of resulting trusts to voluntary conveyances of land under s.60(3) LPA 1925.
- National Crime Agency v Dong [2017] EWHC 3 (Ch): This case emphasized the importance of considering the intention behind property transactions. Application:
- Formalities of Trust Creation: Under LPA 1925, ss.53(2) and 53(1)(b), the creation of trusts in land generally requires written evidence. In this case, Augusta transferred both houses to Henry. However, the transfer of Linden Lodge was intended to be held in trust for Augusta, while Maple Manor was intended as a gift. To establish whether a trust was validly created for Linden Lodge, we need to consider whether oral evidence can be admitted to prove this express trust.
- Admissibility of Oral Evidence: In Rouchefoucauld v Boustead, it was established that oral evidence is generally inadmissible to prove an express trust in the land. However, an exception to this rule exists when there are allegations of fraud. Augusta's sudden death, two months after the transfer, raises questions about whether there was any fraudulent intent in the transfer. If there is evidence to suggest fraud, then oral evidence may be admissible to prove the trust over Linden Lodge.
- Intention to Make a Gift: In Hodgson v Marks, it was clarified that for a valid gift, there must be a clear intention to make a gift. Augusta expressed her intention for Henry to keep Maple Manor as a gift. This demonstrates her intention to gift Maple Manor to Henry. However, there is no clear intention mentioned for Linden Lodge, except that she wanted it to be held in trust. This
lack of intention to gift Linden Lodge is significant in determining the nature of the transfer.
- Presumption of Resulting Trust: Lohia v Lohia discussed the application of resulting trusts to voluntary conveyances of land under s.60(3) LPA 1925. In the absence of a clear intention, a resulting trust may arise. This means that if there is no evidence to prove that Linden Lodge was meant to be held in trust for Augusta, it could be presumed that Henry holds it in trust for Augusta's estate.
- National Crime Agency v Dong: This case reminds us of the importance of considering the intention behind property transactions. It highlights that the court will look beyond the formalities to determine the true intent of the parties involved. Conclusion: Based on the information provided, Henry may hold Linden Lodge in trust for Augusta's estate due to the lack of clear intention to gift it to him. However, Maple Manor was clearly intended as a gift. To determine whether oral evidence can be admitted to establish the trust in Linden Lodge, it is crucial to investigate whether there are any allegations of fraud surrounding Augusta's sudden death. Henry should seek legal advice to properly assess the situation and potentially provide evidence of Augusta's true intentions. It is important to note that this analysis is based on the information provided and may be subject to further facts and evidence that could alter the outcome of the case. Full answer In examining the legal aspects of this case, it is essential to address the formalities required for the creation of trusts in land, the admissibility of oral evidence, the intention to make a gift, the presumption of resulting trust, and the significance of considering the parties' true intent, as elucidated by relevant legal principles and cases. Formalities of Trust Creation: The Law of Property Act 1925 (LPA 1925) in sections 53(2) and 53(1)(b) stipulates that trusts in land generally necessitate written evidence for their creation. In this particular case, Augusta effectuated the transfer of both houses, Linden Lodge and Maple Manor, to her nephew, Henry. It is vital to distinguish the differing intentions concerning these transfers. While the transfer of Maple Manor was expressly intended as a gift, the purpose of transferring Linden Lodge was for it to be held in trust. To determine whether a valid trust was created for Linden Lodge, we must assess whether oral evidence may be admissible to substantiate the existence of this express trust. Admissibility of Oral Evidence: The seminal case of Rouchefoucauld v Boustead [1897] 1 Ch 196 established the general rule that oral evidence is inadmissible to prove an express trust in land, save for instances involving allegations of fraud. In the present case, Augusta's untimely demise, occurring merely two months following the transfer, raises suspicions regarding potential fraudulent intent in the property transfer. To ascertain whether oral evidence can be admitted to substantiate the trust over Linden Lodge, it is imperative to investigate whether there exist any allegations of fraud surrounding Augusta's sudden passing. Intention to Make a Gift: Hodgson v Marks [1971] 2 WLR 1263 clarified the essential elements for a valid
the case law. The mention of some' and 'rest raises problems certainty of subject matter and, for this reason, the trust in favour of the friends fail. Poor answers to question... assume that because L had died, the trust' took the form of a testamentary trust, even though no will was ever mentioned. Other poor answers would mention irrelevant issues from the same guide chapter, such as donatio mortis causa. In analyzing Ophelia's situation regarding the shares in Winthorpe Corp, we should apply the principles of trusts law, specifically focusing on declaration and constitution of trusts. We'll use the IRAC (Issue, Rule, Application, and Conclusion) method to address the legal issues involved. Issue: The primary issue is whether a valid trust has been created with regard to the 500 shares in Winthorpe Corp, which were originally registered in Louis's name, and subsequently transferred to Ophelia upon his death. Rules:
- Declaration of Trust: A declaration of trust occurs when a settlor expresses an intention to create a trust and properly disposes of the trust property. Certainty of intention, subject matter, and beneficiaries are essential elements. Rule: Certainty of Intention - In the context of trusts law, certainty of intention requires that the settlor's intention to create a trust is clear and unequivocal. Ambiguity in the settlor's words may raise doubts about the validity of the trust. Application :Louis's letter states his intention for Ophelia to "keep some of these shares for yourself and use the rest to make gifts to our mutual friends as you see fit." This wording is somewhat ambiguous, as it doesn't specify the exact distribution or percentage of shares for Ophelia and the mutual friends. Case: Jones v Lock (1865) In the Jones v Lock case, the court emphasized that certainty of intention is essential for a valid trust. If the terms of the trust are not sufficiently clear, it may be deemed void. Conclusion:Given the ambiguity in Louis's instructions, it is advisable for Ophelia to consult with a solicitor to seek legal advice on clarifying the terms of the trust. The solicitor can assess the degree of ambiguity and recommend a course of action.
- Constitution of Trust: After the declaration of trust, the trust property must be properly transferred or constituted to the beneficiary. In the case of shares, this typically involves registering the shares in the beneficiary's name. Rule: Constitution of Trust- In order to create a valid trust, the trust property must be properly transferred or constituted to the beneficiary. This usually involves a transfer of ownership or registration in the beneficiary's name. Application: Ophelia received a certificate for 500 shares in Winthorpe Corp, which were originally registered in Louis's name. She also received a properly executed transfer form. This constitutes a valid transfer of the shares to Ophelia, meeting the requirement for the constitution of trust. Statute: Section 136 of the Law of Property Act 1925 Under Section 136 of the Law of Property Act 1925, transfers of shares must be in writing and signed by
or on behalf of the transferor. Conclusion: shares have been properly constituted to Ophelia, complying with the legal requirements.
- Certainty of Subject Matter: To create a valid trust, there must be certainty as to the subject matter of the trust. The property must be identifiable and determinate. Rule: Certainty of Subject Matter- To create a valid trust, there must be certainty as to the subject matter of the trust. The property must be identifiable and determinate. Application:The 500 shares in Winthorpe Corp are specific and identifiable, meeting the requirement for certainty of subject matter. Conclusion: The subject matter of the trust is sufficiently certain, as it involves specific, identifiable shares.
- Secret Trusts: Rule: Secret trusts are trusts where the terms of the trust are not stated in the will but are communicated to the trustee orally or in writing outside of the will. These trusts can be enforceable if the trustee accepts the trust and carries out the settlor's wishes. Application: In this case, Louis's communication with Ophelia was not contained within his will; instead, it was conveyed in a separate letter. Therefore, it could potentially be considered a secret trust if it meets the criteria: Communication: Louis communicated his intention for Ophelia to "keep some of these shares for yourself and use the rest to make gifts to our mutual friends as you see fit" in the letter. Acceptance: For a secret trust to be enforceable, the trustee (Ophelia, in this case) must accept the trust. Acceptance can be demonstrated by the trustee's willingness to fulfill the terms of the trust. Case: Re Rose [1952) The Re Rose case provides guidance on secret trusts. In this case, secret trusts were found to be enforceable when the trustee accepted the trust and acted in accordance with the settlor's wishes. Conclusion:Louis's communication to Ophelia, while not contained in his will, could be construed as a potential secret trust if Ophelia accepted the trust and intends to carry out his wishes regarding the shares. The fact that Louis's letter stated his intentions regarding the shares supports the idea that this could be a secret trust.However, given the ambiguity in the distribution of shares to mutual friends, Ophelia should consult with a solicitor to clarify the terms of the trust. If Ophelia accepts the trust and intends to distribute the shares accordingly, she should seek legal guidance to ensure compliance with the law. Application:
- Declaration of Trust: Louis's letter states his intention to create a trust in favor of Ophelia and
requirements and principles. Issue 2: Constitution of Trust The second issue concerns whether the 500 shares in Winthorpe Corp have been properly transferred or constituted to Ophelia, a crucial aspect of trust law. For a trust to be valid, the trust property must be effectively transferred or constituted to the beneficiary. In most cases involving tangible assets like shares, this involves a formal transfer of ownership or registration in the beneficiary's name. In the present case, Ophelia received a certificate representing 500 shares in Winthorpe Corp, originally registered in Louis's name. Furthermore, she received a properly executed transfer form, indicating a valid transfer of the shares to her name. This transfer adheres to the legal requirements stipulated under Section 136 of the Law of Property Act 1925 , which mandates that transfers of shares be in writing and signed by or on behalf of the transferor. Consequently, the shares have been appropriately constituted to Ophelia, satisfying the necessary legal requirements for the establishment of a trust. Issue 3: Certainty of Subject Matter The third issue revolves around the certainty of the subject matter within the trust, specifically focusing on whether the 500 shares in Winthorpe Corp meet the requisite standard for certainty. In trust law, a valid trust necessitates certainty as to the subject matter of the trust. This means that the property involved must be identifiable and determinate. In the present case, the 500 shares in Winthorpe Corp represent a specific and readily identifiable subject matter. They constitute tangible assets with clear ownership records, making them distinct and identifiable as trust property. In conclusion, the subject matter of the trust, which comprises the 500 shares in Winthorpe Corp, satisfactorily meets the requirements for certainty within trust law. These shares are specific and identifiable assets, which align with the criteria for a valid trust subject matter. 2016 Zone A Barney was an elderly single man who had been married and divorced twice. He arranged a meeting with his closest friend, Lily, Marshall, Robin & Ted to discuss the creation of two trusts a) The Victoria trust for the children and grandchildren of his first marriage to Victoria and b) (b) the Wendy trust for the children and grandchildren of his second marriage to Wendy. Lily and Marshall agreed to be the trustees of the Victoria Trust. The sole trust asset was to be a pub, which was owned by Barney in fee simple. Barney executed the form to transfer his registered title to that estate to Lily and Marshall and handed the form to Lily. Robin and Ted agreed to be the trustees of the Wendy trust. The trust assets were to consist of Barney's shares in a men's clothing company. Barney said he would transfer those shares later. One week later, Robin called Barney to say that she had changed her mind and did not want to be a trustee. Barney said, 'Don't worry, Ted and I will do it. Barney died two weeks later. Nothing further had been done to set up the trusts and nothing about them had
been written down. The transfer of the pub had not been submitted for registration. Carl and Daphne have been appointed as the executors of Barney's estate. They seek your advice about the validity of the Victoria and Wendy trusts. Advise Carl and Daphne. General remarks This problem concerns the formalites and constitution required to create a valid express trust. These issues are discussed in Chapters 5 and 6 of the subject guide and Chapters 6 and 8 of Penner. Law cases and other references the examiners would expect you to use Re Rose [1952] EWCA Civ 4, (1952) Ch 499: Mascall v Mascall [1984] EWCA Civ 10, 50 P&CR 119, T Choithram International SA v Pagarani [2000] UKPC 46, (2001) 1 WLR 1: Rochefoucauld v Boustead [1897] 1 Ch 196 (CA); LPA 1925, s.53(1)(b). Common errors Failing to discuss the formalities needed to create the Victoria trust failing to recognise the effect of Barney deciding to become a trustee of the Wendy trust. A good answer to this question would.... explain that, since Lily has a registrable transfer of the pub, Barney would be holding it on constructive trust for Lily and Marshall on the basis of Re Rose and Mascall v Mascall, and therefore the Victoria trust would not fail for lack of constitution. However, it would be unenforceable for lack of writing and non- compliance with s.53(1)(b) of the LPA 1925. There does not seem to be any fraudulent behaviour that might justify the admission of oral evidence of the trust, as in Rochefoucauld v Boustead. Writing is not required for the creation of an inter vivos trust of company shares. When Barney decided to be one of the trustees, the trust would be constituted since he already owned the shares and would have a duty as trustee to convey them into the joint names of both trustees: Choithram v Pagarani. Poor answers to this question would... fail to recognise that a declaration of a trust of land must be evidenced in writing The constructive trust for Lily and Marshall is different from the express trust for the children and grandchildren and so the problem cannot be avoided by relying on LPA 1925, s.53(2). A poor answer would fail to recognise that the Wendy trust was constituted when Barney decided to become a trustee Some candidates discussed secret trusts even though they were not relevant. The arrangements did not involve testamentary dispositions to the intended trustees.The fact that Barney died two weeks later did not change the intended inter vivos trusts into secret trusts. Student extract Under the provision of s.53(1)(b) LPA 1925, any kind of transfer of land should follow the requirements of writing, signing and witnessing by the testator. In our given facts, Barney has executed the form to transfer his registered title to his trustees Lily and Marshall, and handed it over to Lily. Comment on extract This candidate has confused the formalities required to declare a trust of land with the formalities required to transfer an interest in land. The transfer of a legal estate requires the execution and registration of a deed. The declaration of trust merely needs to be evidenced in writing. LPA 1925, s.53(1)(b) applies to declarations of trust and not to transfers. reference to Barney as 'the testator' also indicates some confusion. While trusts are often declared by will, Barney intended to create. two inter vivos trusts as a settlor. He did not intend to create testamentary trusts as a testator. Issue: The main issue in this scenario is whether the Victoria and Wendy trusts are validly constituted and enforceable under UK law. Rule:
- Express Trust Formalities: In the UK, express trusts must satisfy certain formalities, as outlined in the Law of Property Act 1925 (LPA 1925). LPA 1925, s.53(1)(b) requires that declarations of trust over land must be evidenced in
